Yellen preview — JPM made secret China hire — No place like home at Goldman

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YELLEN PREVIEW: DON’T LOOK FOR BIG NEWS — Janet Yellen, President Obama’s nominee to succeed Ben Bernanke as Chair of the Federal Reserve, appears before the Senate Banking Committee this morning. She is likely to face some hostile questioning from Republicans on QE and some more gentle probing from Democrats on what more she might do to push down the unemployment rate. But don’t expect the savvy Fed Vice Chair to push beyond what Bernanke has already said about the data-dependence of Fed policy or give us fresh clues about when the taper will begin.

S&P Chief U.S. economist Beth Ann Bovino in a client note: “Unfortunately, we don't expect Yellen to provide additional insight on the Fed's thinking regarding changes to its current monetary policy during the hearing. … Despite some obvious economic risks, like those emanating for Capitol Hill, we continue to believe — as we have since June --that the Fed will begin tapering in December. We could hear additional details on the Fed's communication strategy. We expect Yellen to stress the effectiveness of the Fed's recent approach since she spearheaded its communication strategy and has been a key advocate of its data-driven forward guidance”

SIFTING FOR SIGNALS – Pantheon’s Ian Shepherdson: “If Dr. Yellen goes into detail, we would expect her to focus on the importance of labor market indicators beyond the headline unemployment rate and payroll data, stressing that numbers like the employment rate, broad measures of unemployment, job openings and the voluntary quit rate can be just as important. These data are all still pretty terrible, so if Dr. Yellen chooses to highlight them, we would take it as support for continued full-speed Q3 into next year.”

YELLEN SAYS “PROGRESS” MADE, MORE TO BE DONE — In a brief opening statement, Yellen plans to say: “We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession … Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential.

“At the same time, inflation has been running below the Federal Reserve’s goal of 2 percent and is expected to continue to do so for some time. For these reasons, the Fed … is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases” http://1.usa.gov/1cWxskd

ASIA LIKES YELLEN REMARKS — Bloomberg: “Asian stocks climbed the most in a month while metals gained after … Yellen signaled stimulus will be maintained until the U.S. economy improves. The yen dropped for the fourth time in five days against the dollar. … Japan’s economic growth slowed for a second straight quarter. Data today may show expansion in euro-area economy slowed last quarter while wholesale-price inflation quickened in India” http://bloom.bg/HUSLF2

HASHTAG #OOPS — Reuters: “JPMorgan Chase & Co canceled a question and answer session on Twitter with veteran investment banker Jimmy Lee after being flooded with insulting questions less than 24 hours before the session was to begin. ‘Bad idea! Back to the drawing board,’ spokesman Brian Marchiony said by email ...

“Few questions appeared until Wednesday afternoon, when responses piled in, many making fun of the attempt to use social media, insulting executives and reminding readers of the bank's recent legal problems … Reading the #AskJPM Twitter feed makes it seem JPM put a ‘kick me' sticker on its back when it rolled out that hashtag,’ wrote one user.

OBAMACARE ENROLLMENT DISAPPOINTS — POLITICO’S David Nather: “There was no way the early Obamacare enrollment numbers were going to look good — and they sure didn’t. And once you get beyond the White House’s sales pitch, it only gets worse. The … administration did everything possible to dress up the ugliness of the first month of Obamacare enrollment … But perception has a way of becoming reality — and what most Americans will hear is that the 106,000 people who selected health plans in the first month is a long, long way from the goal of 7 million Americans covered in the first year.

“The administration practically pulled out the air freshener for the Obamacare figures. Officially, 106,185 people ‘selected a plan’ — meaning they had picked one out, and might or might not have paid for it. You’re only enrolled if you’ve paid for a plan, but Health and Human Services Secretary Kathleen Sebelius says it’s not surprising that not everyone paid their first premium, because they don’t have to do that until Dec. 15. …

Break down those numbers a bit more, though, and they look even worse. Just 26,794 people selected a plan through the broken federal enrollment website http://politi.co/HSaAoa

SMALL BUSINESSES CONCNERED ABOUT ACA — BMO Private Bank’s Jack Ablin in a client note: “Blame Obamacare or blame the government shutdown. Either way, small business sentiment plunged last month … Confidence among business owners has slipped for two consecutive months to its lowest level since March. Small company leaders are concerned about the impact of the Affordable Care Act on their businesses.

“In a separate survey conducted by the U.S. Chamber of Commerce and the International Franchise Association and cited by the Wall Street Journal, 64 percent of small business franchise owners believe the law will have a ‘negative impact’ on their operations. Just 5 percent felt it would have a positive impact … Twenty-seven percent of franchisees surveyed have replaced full-time workers with part-time workers

BILL COMING TO HILLARY’S AID? — Eurasia Group’s Corey Bowles and David Gordon: “Bill Clinton's comments urging President Obama to honor his commitment that Americans can keep their existing health care insurance plans were clearly designed to provide some distance between the White House and Hillary Clinton as she mulls a run for the presidency … The comments indicate that the Clinton camp isn't taking Hillary's path to the White House in 2016 for granted; particularly with polls showing Hillary's approval ratings sliding, and the increasing threat of a legitimate GOP challenge from New Jersey Governor Chris Christie or former Florida Governor Jeb Bush.

GOOD THURSDAY MORNING — Usually there is something funny, sports-related or nakedly self-promotional in this space. Today I got nothing. You’re welcome.

On TPP: “I've made the case very strongly that we do need to try and complete it this year, not just because of its importance to the U.S. – but because it is important to all parties in the agreement to reach a conclusion. Japan stands to gain quite a lot from TPP being successful. … We always make it clear that we have to get this right and it is very important to get it right. Deadlines matter. Driving towards the end of the year matters. And we have to get it done right, by the end of the year.” Full interview: http://cnb.cx/1bqXhCd

TOP STORY: JPM MAKES SECRET HIRE IN CHINA — NYT’s David Barboza, Jessica Silver-Greenberg and Ben Protess: “To promote its standing in China, JPMorgan Chase turned to a seemingly obscure consulting firm run by a 32-year-old executive named Lily Chang. Ms. Chang’s firm, which received a $75,000-a-month contract from JPMorgan, appeared to have only two employees. And on the surface, Ms. Chang lacked the influence and public name recognition needed to unlock business for the bank.

But what was known to JPMorgan executives in Hong Kong, and some executives at other major companies, was that ‘Lily Chang’ was not her real name. It was an alias for Wen Ruchun, the only daughter of Wen Jiabao, who at the time was China’s prime minister …

“JPMorgan’s link to Ms. Wen — which came during a time when the bank also invested in companies tied to the Wen family — has not been previously reported. Yet a review by The New York Times of confidential documents, Chinese public records and interviews with people briefed on the contract shows that the relationship pointed to a broader strategy for accumulating influence in China: Put the relatives of the nation’s ruling elite on the payroll. And the Wen family’s sway was not just political. After Ms. Wen’s father joined the inner circle of China’s rulers as vice prime minister in 1998, the family amassed a secret fortune through a series of partnerships and investment vehicles http://nyti.ms/1ibAuB5

EXECS IN SWEET SPOT ON STOCK SALES — WSJ’s Susan Pulliam and Rob Barry: “Ordinary investors often are dismayed when senior executives sell their own stock before hitting the market with bad news. The situation can be even stickier when corporate insiders declare their company's outlook bright, sell shares, then disclose bad news. … A Wall Street Journal examination of earnings-guidance data compiled by research firm Earnings Whispers identified 1,468 cases since 2005 in which public companies issued so-called upward guidance — saying results looked better than expected — then followed with downward guidance within 120 days.

“Securities and Exchange Commission filings show that in 755 of those cases, corporate insiders sold in the window between the up and down, an advantageous time to sell. There is no way to tell from the data whether sellers knew about impending bad news before selling, and it is perfectly permissible for insiders to sell stock after upward guidance.” http://on.wsj.com/1hHlUUa

IMMMIGRATION REFORM LOOKS DEAD — POLITICO’s Seung Min Kim and Jake Sherman: “House Republicans will not negotiate over the Senate’s immigration reform bill, Speaker John Boehner said, dealing another blow to the chances of an overhaul being signed into law this year. ‘Frankly, I’ll make clear, we have no intention of ever going to conference on the Senate bill,’ Boehner told reporters … The remarks are a major setback for immigration reform advocates. Many proponents of reform thought that if the House passed small-bore, tightly-focused immigration bills, it would create a pathway for a formal negotiation with the Senate’s bill.

“But conservatives have balked at entering into negotiations, because they fear ending up with a bill that is dominated by the Senate’s priorities. … Boehner said … House Judiciary Committee Chairman Bob Goodlatte (R-Va.) was writing a list of principles intended to guide the party on how to enact immigration reform” http://bit.ly/1a6Fvrc

INVESTORS OFFER TO BUY STAKES IN FANNIE/FREDDIE — FT’s Stephen Foley and Gina Chon in New York and Henny Sender in Hong Kong: “Investors behind a $50bn proposal to take over large parts of Fannie Mae and Freddie Mac are pitching the idea as a way for the US government to wind down the mortgage finance groups, but have already encountered scepticism in Washington. A group of hedge funds and private equity companies have drawn up a proposal to create two private sector firms to take over the job of insuring trillions of dollars of US mortgages, in return for restoring value to Fannie and Freddie preferred shares …

A Treasury official scoffed at the proposal, saying preserving affordable mortgages was an important policy issue that was not meant to be resolved by Wall Street funds looking to make money. … Holders of Fannie and Freddie’s preferred shares include Claren Road Asset Management, Fairholme Funds, Blackstone’s GSO arm, Paulson & Co and Perry Capital, people familiar with the matter said. The investor group holds more than half the $34.6bn preferreds and is soliciting financial backing from others including private equity firms such as Carlyle and KKR. They have recruited Wall Street banks to drum up support.” http://on.ft.com/17rmD1X

ALSO FOR YOUR RADAR –

ICMYI: MORE ON BROWN AS BANKING CHAIR — Yesterday, M.M. highlighted a note suggesting Sen. Sherrod Brown (D-Ohio) might not be as wildly populist as Senate Banking Chair as some in industry fear. Here’s a good read on the subject from FT’s Gina Chon a couple weeks back that we missed at the time: “Members of the staff of Sherrod Brown … have made overtures to financial companies that could help the critic of big lenders become Senate banking committee chairman, say insiders.

“Tim Johnson of South Dakota, current chairman of the Democratic-dominated committee, announced in March that he was not running for re-election in 2014.

Other Democrats who are more senior than Mr Brown on the committee, such as Jack Reed of Rhode Island, are expected to pursue other leadership roles.” http://on.ft.com/1aUB1Ws

BUSINESS KEEPS UP TEA PARTY PUSH BACK — CNBC’s Lawrence Delevingne: “Business people are increasingly fed up with the activist wing of the Republican Party. It's a trend that will have broad implications for next year's midterm elections and the presidential race in 2016, political experts say. … Business interests appear to be rallying behind moderate Republicans Brian Ellis, David Trott and Mike Simpson against tea party-approved challengers Justin Amash, Kerry Bentivolio and Bryan Smith for House seats in 2014 (Ellis and Trott are running in Michigan and Simpson is in Idaho).” http://cnb.cx/HNLG8P

KASHKARI FOR CALIFORNIA? — POLITICO’s Alexander Burns scoops: “Former Treasury Department official and TARP administrator Neel Kashkari is likely to run for governor of California as a Republican in 2014 and has begun the process of gathering advisers for an anticipated campaign, POLITICO has learned. As President George W. Bush’s assistant Treasury secretary for financial stability, Kashkari was the lead official tasked with overseeing the 2008 bank bailouts.

“He left the investment firm PIMCO earlier this year, citing a desire to continue a career of public service. Republican sources say Kashkari, 40, has not made a final decision to run for governor and he is not expected to attend the [RGA] retreat in Arizona this month. But he is already taking counsel from a group of experienced California hands, including strategist Aaron McLear, media consultant Todd Harris and pollster Neil Newhouse and his firm Public Opinion Strategies.” http://bit.ly/1cqcbKM

AT GOLDMAN, THERE’S NO PLACE LIKE HOME — WSJ’s Justin Baer and Julie Steinberg: “On Wall Street, greener pastures are disappearing. At least, that is the message coming from Goldman Sachs … The average tenure for senior employees at the company stands at more than nine years. In 2001, those with the rank of vice president or higher had worked for the firm for an average 7.6 years. Across Wall Street, bankers, traders and other employees are finding fewer reasons — or opportunities — to leave.

“Waves of consolidations and layoffs, both before and since the financial crisis, have left people with fewer places to go. Muted economic growth, a rise in the amount of bonuses that are deferred for a few years and stiffer rules on risk-taking have given Wall Street firms little incentive to hire aggressively.” http://on.wsj.com/186xulq

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